STRATEGIC MANAGEMENT CAPABILITIES THAT DRIVE WEST AUSTRALIAN LAW FIRM SUCCESS

STRATEGIC MANAGEMENT CAPABILITIES THAT DRIVE WEST AUSTRALIAN LAW FIRM SUCCESS Pirrie Moffat University of Western Australia Business School (M261) 35...
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STRATEGIC MANAGEMENT CAPABILITIES THAT DRIVE WEST AUSTRALIAN LAW FIRM SUCCESS

Pirrie Moffat University of Western Australia Business School (M261) 35 Stirling Highway Crawley, WA 6009 Email: [email protected]

Dr Alan Simon* University of Western Australia Business School (M261) 35 Stirling Highway Crawley, WA 6009 Email: [email protected] *Corresponding Author

STRATEGIC MANAGEMENT CAPABILITIES THAT DRIVE WEST AUSTRALIAN LAW FIRM SUCCESS

ABSTRACT

The aims of the study reported in this paper were to identify the strategic management capabilities that are linked to law firm success in WA, to find out what law firms consider to be indicators of success and whether these are related to the strategic capabilities. Content analysis, depth-interviews and questionnaire surveys were used to collect qualitative and quantitative data. Twenty-five strategic capabilities were identified. Of these, the five most crucial, in descending order, were client trust, being attuned to client needs, legal expertise/competence, integrity and honesty, and service quality. Thirteen success indicators were discovered, of which, client satisfaction, client retention, outcomes for clients, referrals and profitability were found, also in descending order, to be the most important performance measures.

Keywords: strategic capabilities, law firms, management, Australia.

Stream: Strategic management

There is a vast amount of information available on strategic capabilities and success indicators generally in the management literature. However, the importance of this study lies in the fact that there is very little literature and empirical research on the strategic management capabilities that drive and constitute success in professions, in this case the law industry. As will be seen, twenty-five strategic capabilities were recognised as having a significant impact on law firm success. Furthermore, thirteen performance indicators were identified as success factors in the legal profession. All of the strategic capabilities were related to at least one performance measure. Similar studies have previously been conducted in the management consulting and advertising industries (e.g., Kumar, Simon and Kimberley, 2000 and Simon and Power, 2004 respectively). Like these industries, the legal profession is also a part of the service sector. However, the legal industry faces unique pressures which partly account for differences in the results. It faces a competitive environment, is widely known for having a negative image and there is a dearth of information on what constitutes the profession’s drivers and indicators of success. In sum, it is illuminating to see what strategic capabilities law firms are developing in an effort to deal with the challenges the industry is facing.

THEORETICAL FRAMEWORK The major focus of this research was to discover the strategic management capabilities that provide law firms with a competitive edge in the market.

Strategic capabilities Hubbard, Pocknee and Taylor (1996) advocate that for a capability to possess strategic value it must embody three distinctive elements: First, it must be of value to the customer (Schreyögg and KlieschEberl, 2007; Teece, Pisano and Shuen, 1997; Wells, 1998). Second, the organisation’s capability must be better than that of most of the competition. Lastly, a strategic capability is difficult to imitate or replicate (Teece, 2007). Strategic capabilities must be consciously and continuously cultivated by an organisation to ‘a level of proficiency greater than anything else it does and particularly better than any competitor does’ (Robert, 1993: 55). This requires significant investment by the company in terms of time and resources, but is necessary to acquire and maintain a sustainable competitive advantage (Hayes, Pisano and Upton, 1996; Hubbard et al., 1996; Prahalad, 1983; Robert, 1993). A firm’s strategic capabilities may reside in its resource dimensions, operating functions, or ‘networks of interdependence both within the firm and between the firm and aspects of its environment’ (Lenz, 1980: 226; Hubbard et al., 1996).

Keeys (1997) favours the analogy that fierce industry competition, such as that faced in the legal profession, is like a war, referring to strategic capabilities as “attack capabilities” and the environment as a “battlefield.” Strategic capabilities have the ability to place a firm in a very appealing competitive position in the marketplace. In fact, as highlighted by Kumar et al. (2000), an organisation can outperform its competitors by identifying its strategic capabilities, aligning them with the surrounding environment, and incorporating them into a solid strategy. The employment of such an approach to identifying and cultivating a sustainable competitive advantage in the relevant industry is referred to as competing on capabilities (Ghemawat, 1986; Kumar et al., 2000; Simon and Power, 2004; Stalk, Evans and Shulman, 1992). It needs however be noted that organizations and professional firms need

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to develop individualized strategic capabilities otherwise they are no longer rare and difficult to replicate. It follows also that firms which develop outstanding capabilities should be more successful.

Indicators of success Kaplan and Norton (2005: 172) advocate the use of both financial and operational measures of organisational performance, also referred to as “hard” and “soft” indicators, because ‘no single measure can provide a clear performance target or focus attention on [all] the critical areas of the business’. “Hard” indicators include quantifiable measures such as profitability, growth, competitive ranking, and market share (Hubbard et al., 1996; Kaplan and Norton, 2005). These traditional financial indicators are examples of external performance measures. “Soft” indicators are internally focused and include elements such as employee and client satisfaction, quality (Cho and Pucik, 2005), and teamwork. The increasing importance of operational indicators parallels the increasing influence of the service sector, and as such are relevant to an analysis of law firm success.

In order to arrive at the crucial strategic capabilities and success indicators, we adopted the following approach. Because of the paucity of literature pertaining to the law profession, we first content analysed lawfirms’ websites and looked for a number of supporters for capabilities and success indicators. For example 14 websites mentioned quality of service, a strategic capability while 4 mentioned client satisfaction, a “soft” success indicator. We applied the same method in the interviews. Quality of service was supported by 5 interviewees while client satisfaction was supported by 4. We then cross referenced frequently supported strategic capabilities and indicators of success to the literature. This literature review is not provided in full here for reasons of space constraints. However by way of example, here is the cross referencing for service quality. Parasuraman et al. (1985) argue that service quality is the degree to which the service level provided corresponds to client expectations on a consistent basis. ‘The future of competition is being shaped by changes in the meaning of value…value is now centered in the experiences of consumers’ (Prahalad & Ramaswamy, 2004: 137). However, there is a difference ‘between providing good service…and providing a level of service that distinguishes your firm in the marketplace. That sort of service is extraordinarily difficult

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to provide and relatively few firms do so’ (Altonji, 2004: 6). A study conducted by Kumar et al. (2000) found that quality of service proved to be the most critical strategic capability in the management consulting industry. Quality service provision is as essential for law firms as for any other organization.

RESEARCH METHOD

As mentioned earlier, the legal profession was selected for our research study because it faces unique pressures. Firstly, the environment is intensively competitive and WA law firms are experiencing overwhelming levels of demand. In the last year there has been a phenomenal increase of 31.8% in the number of law firms in WA. Secondly, the legal profession is widely known for having a negative public image. Thirdly, there is very little empirical research on what constitutes either drivers or indicators of success specific to the legal industry. This study used a modified Generative Research Strategy based on an ideal type produced by Simon, Sohal and Brown (1996). This model integrates qualitative and quantitative research methods into one total triangulated process (Denzin, 1989). In its ideal form, the research method consists of three phases. The first stage requires the researcher to generate the crucial themes from the target population using a variety of qualitative techniques. The second phase involves further developing and elaborating these critical concepts through additional data collection. The third and final phase requires the researcher to formalise the study by using quantitative measures, such as a questionnaire (Simon et al., 1996). In its ideal form, the Generative Research Design is exhaustive and complete in its implementation in a research project (Kumar et al., 2000; Simon, Oczkowski and Jarrat, 1995). However, it demands resources beyond that which can be provided by a single researcher, as in this case (Kumar et al., 2000; Simon et al., 1995). As such, a modified generative research design was used for this research (see Figure 1). Following a literature review, a content analysis of relevant legal firms’ websites was conducted in an effort to generate major themes and ideas from the population. The websites of 22 randomly selected law firms listed in the 2007 Blackstone Society Careers Handbook were content analysed. Of these, six (27.3%) were large law firms, nine (40.9%) were

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medium sized law firms and seven (31.8%) were small. This assisted the formulation of the interview schedule used in the second phase. Fifteen depth interviews were conducted in the second phase. Eighty percent of interviewees were male, and 20% were female. The oldest participant was 76 years and the youngest was 23 years. The interviewees held an assortment of positions including that of Principal (40%), Managing Partner (6.7%) and Articled Clerk (6.7%). Eighty percent of the interviewees practiced in small or ‘boutique’ law firms, two (13.3%) were from medium sized law firms and one (6.7%) worked in a large firm. Upon completion, all the gathered information was used for the construction of a questionnaire. The questionnaire was administered to all law firms in WA in the third and final phase of the research. Questionnaires were mailed to all law firms listed in the 2007 Law Society of WA Directory and 102 responses were received. Law firms were first telephoned in order to identify the appropriate lawyer to personally address the mail survey package to. Seventy-one percent of questionnaire respondents were male and 29% were female. The average age of respondents was 48 years with the youngest being 22 and the oldest 78. The mean number of years in the legal profession was 21 years. There was a large range in experience between respondents with one having only been in the legal profession for one year, whilst the longest serving respondent had spent 47 years in it. Regarding firm size, 86.3% of respondents practiced in small law firms, 9.8% in medium and 2.9% in large law firms (1% unstated).



FINDINGS Qualitative findings Strategic capabilities and success indicators (interviews) The combined results of a literature review, content analysis and interviews revealed twenty-five strategic capabilities and thirteen indicators of success (all contained in Tables 2 and 3 discussed shortly). All of the interviewees were of the view that there is a nexus between these strategic capabilities and performance indicators. These ideas were explored further the analysis of the questionnaire data.

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Quantitative findings from the questionnaire survey Questionnaires were mailed to all law firms listed in the 2007 Law Society of WA Directory and 102 responses were received.

Reliability and Validity Some examples of Cronbach Alpha scores for relevant scales used in this research to test for reliability are: Practical solutions and problem solving – 0.904; Employee career development and employee retention – 0.864; Employee retention and recruitment – 0.746; Profit and revenue – 0.826

Cross-tabulations were also computed to test for content validity. The results of the main survey (which included the pre-test responses) were compared with the results from the responses received following the reminder letter. The results were almost identical for all questions. Frequencies for the demographic variables are displayed in table 1:



Table 1 clearly shows very little difference between responses pre and post reminders.

Strategic capabilities The twenty-five strategic capabilities generated by the literature review, content analysis and interviews were assessed in the questionnaire for their degree of importance in achieving law firm success. Respondents were asked to indicate the extent to which the strategic capabilities were implemented or promoted in their law firm to increase success. Essentially, the aim of this question was to discover the strategic capabilities WA law firms actually use to enhance success, as opposed to merely those that they consider to be key at a broad level (even though they may not necessarily implement them). The respondents were also asked to rank the three most important strategic

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capabilities for their law firm. These initial rankings were used to calculate weighted scores (based upon three levels of importance) for the strategic capabilities, which were subsequently ranked based on the number of points accumulated (see Tables 2 and 3).



The overall points’ scores for the strategic capabilities provided in Table 3 were calculated as follows. If a respondent deemed a strategic capability to be the most important it was given a weighted score of 3 points. For second most important, a score of 2 was awarded and 1 for third most important. All scores were then summed across the rankings of level of importance for all 25 capabilities.

The five most crucial strategic capabilities for WA law firm success, in descending order, are client trust, being attuned to client wants/needs, legal expertise/technical competence, integrity and honesty, and quality of service. Given the nature of the work of lawyers, a relationship based on trust between the lawyer and client is essential so that lawyers elicit all necessary information to ensure that the best result is obtained for their client. Being attuned to client wants/needs includes recognition of a client’s business needs (Palihawadana and Barnes, 2004). The importance placed on the strategic capability of legal expertise/technical competence is logical, given that it is a fundamental basis upon which a lawyer is engaged (Palihawadana and Barnes, 2004). Integrity and honesty are essentially ethical considerations. Ethics are paramount in the legal profession and touch every dimension of a lawyer’s work. Issues such as confidentiality and maintaining legal professional privilege are particularly pertinent to the legal profession. The importance of quality of service is not surprising given that the legal profession is a de facto service provider. It is vital for law firms to specifically determine what it is their clients expect (a solution? a personalised experience? insurance? peace of mind?), and deliver accordingly (Prahalad and Ramaswamy, 2004; Razeghi, 2003).

Indicators of success The thirteen performance measures emerging from the literature review, content analysis and interviews were canvassed in the questionnaire survey for their degree of importance in signifying law

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firm success. Respondents were also asked to rank the three most important indicators of success for their law firm. The top five performance measures employed by WA law firms were, in descending order, client satisfaction, client retention (White, Lemon and Hogan, 2007), results/outcomes for clients, referrals and profit. The first four of these revolve around the client and are all interlinked. While this is not surprising given that the legal industry is part of the service sector, what is noteworthy is that financial, or “hard” indicators do not appear to be as important as these “soft” or non-financial indicators. However, firms operating in the service sector should harness both forms to ensure success (Heskett et al., 1994, Kaplan and Norton, 2005).



The same weighted scoring procedure used for Table 3 was employed for Table 5.

Client satisfaction was considered by the legal community to be the most important indicator of law firm success. It scored 173 points which was well ahead of the second ranked performance measure, client retention, which rated 96 points. Almost 100% of respondents considered client satisfaction to be an important measure of success to at least some degree. Client retention was ranked second behind client satisfaction with 71.3% considering it to be a critically important measure. Only one respondent considered it to be a totally unimportant indicator of success. The vast majority of questionnaire respondents (83.3%) stated that results/outcomes for clients was a critical measure of success to their law firm. In fact, only 1% of respondents felt that it was totally unimportant. Referrals are considered to be the fourth most significant indicator of success. Again, this exhibits an interconnection with client satisfaction, client retention and results/outcomes for clients. A happy client is more likely to refer people on to their law firm through word of mouth. The responses indicate that 93% of respondents consider it to be an important indicator of WA law firm success. Profitability, one of the most universal financial measures, was the only “hard” indicator that was ranked in the top five success measures.

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It is noteworthy that only one, the fifth ranked success indicator, is a financial (or “hard”) performance measure. Distinct emphasis is placed on “soft” or non-financial indicators in the legal profession which rivals the widely held view that traditional financial measures dominate.

Relationship between strategic capabilities and performance measures Importantly, chi-square (x2) tests of independence revealed that every strategic capability was significantly related to at least one success indicator. The general (alternate) hypothesis tested in this study was that there is a relationship between strategic capabilities and the indicators of organisational success in the legal profession. The specific hypotheses were tested using x2 tests of independence. Every single strategic capability was assessed against every indicator of law firm success, which comprised of both financial and non-financial measures (Heskett et al., 1994, Kaplan and Norton, 2005). This resulted in 325 hypotheses, of which 110 produced a significant result (p < 0.075) (see Table 6).



Table 6 presents a matrix of significant relationships confirmed by the bivariate hypotheses testing. The boxes that exhibit a p value < 0.075 reveal that a significant relationship exists.

All the strategic capabilities were significantly related to at least one performance measure. Further, not all the strategic capabilities were related to both “hard” and “soft” indicators of success. Table 6 indicates that the “big ticket” success indicators are client satisfaction, feedback from clients, client retention, employee satisfaction and a strong client base. The “big ticket” strategic capabilities are organisational

culture,

practical

solutions,

reputation,

teamwork

and

networking/building

relationships. “Big ticket” strategic capabilities and success factors were determined from total numbers of significant relationships.

Factor analysis Factor analysis was also conducted but proved to be of limited use (see Table 7).

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Table 7 shows that the strategic capabilities loaded on many (6) factors. Essentially this appears to indicate that there are not just one or two overarching themes for the strategic capabilities, but several. It is possible to infer from this that law firms require a range of many disparate strategic capabilities to gain a competitive edge in a competitive industry.

CONCLUSION In order for law firms to gain a competitive edge in the market, it is necessary for them to implement a diverse portfolio of strategic capabilities, which are all related to one or more of the indicators of law firm success. The success indicators are both financial and non-financial, with a distinct emphasis being placed on the latter by the WA legal industry. The five most crucial strategic capabilities for law firm success, in descending order are, client trust, being attuned to client wants/needs, legal expertise/technical competence, integrity and honesty, and quality of service. The five most critical performance measures of law firm success, in descending order are client satisfaction, client retention, results/outcomes for clients, referrals and profit, the last the only “hard” success indicator. It could be argued that paradoxically, if all law firms implement these capabilities then they will no longer be rare and difficult to imitate. This will lead to strategic herding for Natterman 2000 where firms all ‘begin to occupy the same strategic ground’ (Natterman 2000: 17). For this reason Cummings and Angwin (2004, p. 21) suggest that companies or firms need ‘individualized approaches that seek both economies of scale and unique identities in the marketplace’. We recommend therefore that lawfirms and indeed all other organizations need to individualise their strategic capabilities. Clearly the firms that develop outstanding capabilities should be more successful.

Limitations and suggestions for future research This research has four main limitations. Firstly, there were some discrepancies in the results obtained from the content analysis compared to the other instruments. This is because most of the websites that

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were content analysed were for medium to large sized law firms. However, most law firms listed in the Directory are sole practitioners and ‘boutique’ law firms that do not have websites. Secondly, a larger number of interviews would have been useful, although great difficulty was experienced in obtaining permission to conduct them. Thirdly, the cross-sectional design does not allow a comparison of the short and long-term impact of strategic capabilities on the success of the law firms. Lastly, while 5 of the most crucial strategic capabilities for lawfirm success are generic management capabilities, some caution needs to be exercised in generalizing our findings among law firms to other organizations across the board. In addition to remedying the limitations discussed above, a number of suggestions are made for future research to enhance precision. Firstly, it would be a good idea to analyse the strategic capabilities of large, medium and small firms separately as size appears to be a major factor in regards to where firms focus their energies in developing a competitive edge. Future research on the issue could also look at ways of how to cultivate strategic capabilities in professional firms. Finally research could be conducted from the client’s perspective as to what strategic capabilities they consider a professional service provider must possess to stand out.

REFERENCES Altonji JB. 2004. How self-delusion torpedoes strategic thinking. Of Counsel 23 (5): 6-8. Cho HJ, Pucik V. 2005. Relationship between innovativeness, quality, growth, profitability, and market value. Strategic Management Journal 26: 555-575. Cummings S, Angwin D. 2004. The future shape of strategy: Lemmings or chimeras. The Academy of Management Executive 18 (2): 21-36. Denzin NK. 1989. The Research Act: A Theoretical Introduction to Sociological Methods. 3rd edn. Prentice Hall: New Jersey. Ghemawat P. 1986. Sustainable advantage. Harvard Business Review 64 (5): 53-58. Hayes RH, Pisano GP, Upton DM. 1996. Strategic Operations: Competing Through Capabilities. The Free Press: Sydney.

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Heskett JL, Jones TO, Loveman GW, Sasser WE, Schlesinger LA. 1994. Putting the service-profit chain to work. Harvard Business Review 72 (2): 164-174. Hubbard G, Pocknee G, Taylor GA. 1996. Practical Australian Strategy. Prentice Hall: Sydney. Kaplan RS, Norton DP. 2005. The balanced scorecard – measures that drive performance. Harvard Business Review 83 (7): 172-180. Keeys G. 1997. Gaining strategic focus in the competitive environment. Strategic Direction (131): 79. Kumar V, Simon A, Kimberley N. 2000. Strategic capabilities which lead to management consulting success in Australia. Management Decision 38 (1/2): 24-35. Lenz RT. 1980. Strategic capability: a concept and framework for analysis. Academy of Management: The Academy of Management Review 5 (2): 225–324. Natterman P. 2000. When benchmarking fails. Strategic Direction 16: 17-19. Natterman P. 2000. Best practice does not equal best strategy. McKinsey Quarterly 2: 2-4. Palihawadana D, Barnes B. 2004. Client loyalty and defection in the corporate legal industry. The Service Industries Journal 24 (4): 101–114. Parasuraman A Zeithaml V. Berry LL. 1985 Perceived service quality as a customer-based performance measure: an empirical examination of organizational barriers using an extended service quality model. Human Resource Management 30 (3): 335-364. Prahalad CK. 1983. Developing strategic capability: An agenda for top management. Human Resource Management 22 (3): 237–254. Prahalad CK, Ramaswamy V. 2004. The Future of Competition: Co-creating Unique Value with Customers. Harvard Business School Press: Boston. Razeghi AJ. 2003. Creating success. American Lawyer 1 March. Robert M. 1993. Strategy Pure and Simple: How Winning CEOs Outthink Their Competition. McGraw-Hill: Sydney. Schreyögg G, Kliesch-Eberl M. 2007. How dynamic can organizational capabilities be? Towards a dual-process model of capability dynamization. Strategic Management Journal 28: 913-933.

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Simon A, Oczkowski E, Jarrat D. 1995. Business Research Project Design. Charles Stuart University: Bathurst. Simon A, Power D. 2004. The top three management and top three general strategic capabilities considered important for the success of Australian advertising agencies. CD Proceedings, Scandinavian Academy of Management and the International Federation of Scholarly Association of Management conference, Goteberg, Sweden, 5-7 July. Simon AM, Sohal AS, Brown A. 1996. Generative and case study research in quality management (Part 1). International Journal of Quality and Reliability Management 13 (1): 32-41. Stalk G, Evans P, Shulman LE. 1992. Competing on capabilities: the new rules of corporate strategy. Harvard Business Review 70 (2): 57-69. Teece DJ. 2007. Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal 28: 1319-1350. Teece DJ, Pisano G, Shuen A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal 18 (7): 509-533. Wells S. 1998. Choosing the Future: The Power of Strategic Thinking. Butterworth-Heinemann: Melbourne. White TB, Lemon KN, Hogan JE. 2007. Customer retention when the customer’s future usage is uncertain. Psychology & Marketing 24 (10): 849-870.

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PHASE 1:

Review of the Literature

PHASE 2: 15 Semi-structured Interviews

Content Analysis of 22 Websites

Qualitative Analysis PHASE 3:

419 Questionnaires 102 returned (Pre-tested – 10%) Figure 1:

Table 1:

Quantitative Analysis SPSS Windows Modified generative research design

Content validity test results - demographic variables

Demographic Variable Gender Male Female Assessment of Below Average Potential Long-Term Average Success of Firm Above Average Position Principal Field Commercial Lit. Criminal Law Property Law

Main Survey 73.5% 26.5% 2.4% 39.3% 58.3% 57.0% 41.4% 20.7% 48.3%

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Post Reminders 73.3% 26.7% 0% 46.7% 53.3% 57.1% 40.0% 20.0% 46.7%

Table 2:

Strategic capabilities – frequency of responses

STRATEGIC CAPABILITY Accessibility Attuned to Client Wants/Needs Client Trust Commercial Approach Communication Credibility Efficiency Employee/Career Development Employee Retention Flexibility Integrity and Honesty Legal Expertise/Technical Competence Networking/Building Relationships Organisational Culture Practical Solutions Problem Solving Quality of Service Reasonable Rates/Fees Recruitment Reputation Setting Clear Objectives Strategic Thinking (big picture) Strategic Thinking (environment) Teamwork Unique Product/Service

TO GREAT EXTENT # %

TO SOME EXTENT # %

TO LITTLE EXTENT # %

TO NO EXTENT # %

62 77 86 58 68 79 67 12 36 51 87 76

66 77 86 58.6 71.6 79 67 12.9 38.3 53.1 87 76

25 19 14 30 27 20 31 43 34 33 11 21

26.6 19 14 30.3 28.4 20 31 46.2 36.2 34.4 11 21

4 3 0 8 0 1 2 23 10 11 2 3

4.3 3 0 8.1 0 1 2 24.7 10.6 11.5 2 3

3 1 0 3 0 0 0 15 14 1 0 0

3.2 1 0 3 0 0 0 16.1 14.9 1 0 0

26

26.5

45

45.9

22

22.4

5

5.1

21 68 63 77 62 8 68 36 38

22.6 67.3 63.6 77 61.4 8.7 68 36.7 38.8

26 31 30 21 33 29 24 34 35

28 30.7 30.3 21 32.7 31.5 24 34.7 35.7

31 1 5 2 5 23 6 25 18

33.3 1 5.1 2 5 25 6 25.5 18.4

15 1 1 0 1 32 2 3 7

16.1 1 1 0 1 34.8 2 3.1 7.1

8

8.4

27

28.4

28

29.5

32

33.7

28 24

29.5 25.3

33 28

34.7 29.5

20 28

21.1 29.5

14 15

14.7 15.8

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Table 3: Rank (Overall) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Table 4:

Top 15 strategic capabilities (weighted average) Strategic Capability

Score (Points)

Client Trust Attuned to Client Wants/Needs Legal Expertise/Technical Competence Integrity and Honesty Quality of Service Reputation Accessibility Commercial Approach Reasonable Rates/Fees Efficiency Communication Employee Retention Credibility Practical Solutions Networking/Building Relationships

79 74 64 53 45 43 35 31 28 26 21 21 20 17 12

Law firm success indicators – frequency of responses

SUCCESS INDICATORS Accrual of New Work Client Retention Client Satisfaction Employee Satisfaction Feedback from Clients Growth Industry Awards Profit Referrals Results/Outcomes for Clients Revenue Strong Client Base Time Billed

CRITICALLY IMPORTANT # %

OF LITTLE TOTALLY OF SOME IMPORTANCE IMPORTANCE UNIMPORTANT # % # % # %

40 72 86 52 37 13 0 36 56 85

42.6 71.3 86 53.6 37.4 13.1 0 36.4 56 83.3

47 24 13 31 46 37 9 57 37 16

50 23.8 13 32 46.5 37.4 9.2 57.6 37 15.7

5 4 0 7 15 37 38 4 5 0

5.3 4 0 7.2 15.2 37.4 38.8 4 5 0

2 1 1 7 1 12 51 2 2 1

2.1 1 1 7.2 1 12.1 52 2 2 1

38 60 20

38.4 60 20.2

51 33 48

51.5 33 48.5

7 6 22

7.1 6 22.2

3 1 9

3 1 9.1

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Table 5: Rank (Overall) 1 2 3 4 5 6 7 8 9 10

Top ten law firm success indicators Strategic Capability

Score (Points)

Client Satisfaction Client Retention Results/Outcomes for Clients Referrals Profit Employee Satisfaction Accrual of New Work Strong Client Base Revenue Growth

173 96 85 78 51 38 29 25 22 7

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.051*

.040* .055

.059* .000 .001* .018

.032

.039* .019 .004

.017* .008 .005

.019*

.057*

.055 .016

.041

2

3

2

3

.010

.003* .047 .049

.059 .029

5

3

4

.029 4

4

1

3

.070 .059 .002* .002 .001* .016*

.069 .038 .020 .043 .003 .008*

.048 .069

.001

.017

7

.001 .005* .062 .034 9 8

.064

.020

.032

.034 6

6

.003 .000* .032 .031 4 8

6

.050*

.046 .011 .014 .004* .004 .000*

.021

.013 2

1

Number of Significant Relationships

.005*

Unique Product/Service

.009 .017 .022 .012

Teamwork

.018 .025* .028 .004

.002*

Strategic Thinking (big picture)

Reputation

Recruitment

Reasonable Rate/Fees

Quality of Service

Problem Solving

Practical Solutions

.057 .009 .002* .001* .038* .060* .001* .001 .000* .042 .001

.022 3

Organisational Culture

Integrity and Honesty

Flexibility

Employee Retention

Employee/Career Development

Communication

.073

Strategic Thinking (environment)

.039

.070 .000* .009

Setting Clear Objectives

.039 .004

Efficiency

.011 .009* .004

Credibility

Accrual of New Work Client Retention Client Satisfaction Employee Satisfaction Feedback from Clients Growth Industry Awards Profit Referrals Results/Outcomes for Clients Revenue Strong Client Base Time Billed # Sig. Relationships

Commercial Approach

* = >20 % of cell frequencies (1) less than 5

Accessibility

Success Indicators (below)

Client Trust

vs.

Attuned to Client Wants/Needs

Strategic Capabilities (to the right)

Networking/Building Relationships

Summary of chi-square test results

Legal Expertise/Technical Competence

Table 6:

.055* .035 .028* .001 .034* 5 8

9 13 16 .000* .056 11 .045* .000 .004 16 .000* .018 8 0 0 3 .025* .011* .025* 9

3

9 11 5

Table 7:

Factor analysis Factor 1 2 3 4 5 6

% of Variance Explained 17.36 16.24 11.65 9.87 7.39 7.25

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